I was disappointed but not surprised by Lord Chancellor George Osborne’s proposals to save the insurance industry “£ 2 billion” by changing the rules relating to lower value personal injury claims. In his Autumn Statement on Wednesday, he revealed that the Government is going to try and stop many of those who suffer from soft tissue injuries as a result of road traffic accidents from receiving any compensation for their injuries.
He also said that the Government is going to increase the Small Claims Court limit for all injury claims from £1000 to £5000. This means that anyone who has an injury (not including the other losses arising from an accident such as loss of earnings, cost of care, medication, damaged property and other items) will have to bring their claim in a Court where solicitor’s fees are not recovered from the opponent. Currently, most of a successful injured person’s legal costs are paid by the opponent’s insurers. Under the new proposals, anyone with such an injury will have to pay their own solicitors’ costs or deal with their claim themselves.
As examples of injuries valued at less than £5000, the Judicial College Guidelines list the following:-
Fractured ribs (up to 3k)
Food poisoning symptoms continuing for weeks (up to 3.3k)
Neck injuries lasting up to 12 months (Maximum £3630)
Back injury lasting up to 3 months (up to £2050)
Minor wrist fracture (£3960 maximum)
Fractured thumb with recovery in six months except for residual stiffness and some discomfort (£3,300 maximum)
If these proposals are implemented – and that is far from certain – the Government says that the insurance industry will save around £2 billion in payments and that the average cost of car insurance will drop by £50 to £60 per annum.
I suspect that the proposals are far from finalised because the wider implications for the Government and its budget have probably not been evaluated.
The winners would be the insurers whose profits and share prices would increase. Whether savings would be passed onto customers is by no means certain. If they do, whether they would reduce premiums by £50 to £60 remains to be seen.
The losers would include:-
People injured through no fault of their own, including those who will lose several weeks of pay and suffer from painful and disabling injuries. They will either be unable to bring a claim or lose much of their damages in fees.
Those employed by solicitors, medical agencies, before-the-event insurers and claims management companies who will be made redundant as the majority of personal claims have an injury value of under £5000. This could put thousands of people out of work.
The Department for Work and Pensions, which recovers state benefits paid to injured people when they have won their claims. The losses will extend to many millions of pounds. It will also have to pay more benefits to those who lose their jobs.
HM Revenue and Customs which will lose tax revenue from the salaries of those who will lose their jobs or suffer pay cuts, VAT on legal fees and medical report fees as well as income tax on solicitors’ firms’ income and the incomes of claims management companies and medical agencies.
The Government – which will lose tax income, benefit repayments and votes from all the people affected.
I hope that once the proposals are seriously considered and that organisations such as the Association of Personal Injury Lawyers, the Law Society and a Transport Select Committee (which advised the Coalition against such a move in 2013) have put their views to the Government, then George Osborne and the Cabinet will make another U-Turn (as with welfare benefits) and realise that there are more important aspects to governing the country than pleasing his insurer friends.
Perhaps if one or two members of the Cabinet are involved in accidents, they might see things differently?
Now that rant is over, I’m preparing for a good South Yorkshire football derby at Barnsley tomorrow, followed by a curry and drinks with friends. I wonder if any of that would appeal to George O?
Jonathan
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